SAA's boundless flights of fancy

NEWS ANALYSISEvents at South African Airways call to mind watching one of those river carnivals where contestants launch ever more bizarre flying contraptions off a high platform, only for them to plunge into the water below.

But at SAA it’s not funny – each disastrous iteration of the airline’s mismanagement costs the taxpayer billions of rands.

The removal of the feckless Malusi Gigaba as minister of public enterprises shows that President Jacob Zuma is still capable of taking decisions in the public interest, but Gigaba has left a huge mess to clear up – and not only at SAA.

His successor, Lynne Brown, has so far demonstrated commendable common sense, but she is confronted with state-owned enterprises that have been decimated by years of political interference, notably through the appointment of pliable boards and managers.

SAA’s management has been wracked by instability since September 2012, when the majority of the board, led by former chair Cheryl Carolus, resigned over a breakdown in its relationship with Gigaba.

Chief executive Siza Mzimela and some of her key lieutenants followed in early October 2012.

Both Mzimela and the Carolus board were regarded as competent and hardworking, but were allegedly subject to interference and obstruction by the ministry.

Gigaba handpicked the new board, appointing Vuyisile Kona as chair. When Mzimela departed, Gigaba is said to have personally introduced SAA staff to Kona, who was appointed as acting chief executive.

According to evidence at a later court case, Kona told staff “that the shareholder and board had given him carte blanche to do as he wishes” – an apparently mistaken impression that proved his undoing.

By February last year, Kona had been suspended by the board and was then fired by Gigaba over his irregular appointment of several consultants.

In between, on October 29, Kona attended a meeting at the Saxonwold compound of the Gupta family, which included Siyabonga Mahlangu, a legal adviser to Gigaba.

Although Kona has never spoken publicly about the meeting, a version that suggested money had been discussed was leaked to the Sunday Times after Kona had been removed as a director on March 11.

Both Mahlangu and the Gupta family spokesperson, Gary Naidoo, said the discussion was about switching the company business to SAA and that nothing untoward was involved.

Following Kona’s departure, Dudu Myeni, a survivor of the Carolus board, was confirmed as board chair, despite concerns about her appropriateness.

Myeni is the chair of the Jacob Zuma Foundation and is considered to be personally close to the president, but faced accusations of divisiveness over her previous tenure at the Mhlathuze Water Board and having a mediocre record at SAA.

If Gigaba thought Myeni was a pushover he was mistaken.
Together with her SAA board ally, Yakhe Kwinana, also a board member of Zuma’s foundation, Myeni has formed the core of a faction that has rendered the airline’s board dysfunctional, taking on Gigaba, his board allies and the new SAA chief executive, Monwabisi Kalawe.

In January this year, six nonexecutive directors – all Gigaba appointees – submitted a letter to the then minister expressing “major dissatisfaction” with Myeni’s leadership of the board.

According to a Business Day report, the letter also complained that Myeni allegedly cancelled board meetings that were meant to deal with the acquisition of new wide-bodied aircraft to serve SAA’s long-haul routes.

The six board members complained that this meant SAA had lost delivery slots for new fuel-efficient aircraft and their planned delivery from 2016 would be delayed.

The attempt by the Gigaba faction to raise the delay of a decision on new aircraft – worth about R60-billion – is ironic.

Last year amaBhungane revealed that SAA’s fleet committee selected the new Airbus A350 over Boeing’s long-haul offering in a recommendation to the board in late August 2012.

But Gigaba parried the decision, indicating that public enterprises was concerned that there was no “long-term strategy” that informed the fleet renewal programme.

In January Gigaba again intervened, ordering the airline to rework its tender for long-haul planes, saying the bid proposal did not make sufficient provision for “industrialisation and localisation”.

Meanwhile Myeni survived as chair, but another ally of hers, advocate Lindi Nkosi Thomas, resigned in February, citing a breakdown in the professional relationship with certain other board members, including Kalawe, the chief executive.

In May – after the elections – Myeni hit back. It emerged that the chair and Kwinana had asked the auditor general to investigate Kalawe in relation to several allegations, including fuel procurement irregularities and negotiating to buy a stake in the insolvent Senegal Airlines – without the board’s knowledge.

Gigaba sprang to Kalawe’s defence, telling a media briefing he had “full confidence” in the chief executive and he would “deal with” Myeni and Kwinana.

But it was Gigaba who was dealt with by the president, who days later shuffled Gigaba off to the home affairs ministry and appointed Brown in his stead.

On October 15, Brown signalled her intention to get rid of six Gigaba appointees, but to retain Myeni and Kwinana at a special board meeting on Thursday (October 23).

Brown yesterday made good and axed the Gigaba faction, retained Myeni and Kwinana and announced the appointment of two new board members: Dr John Tambi and Anthony Dixon.

Dixon (68) is a chartered accountant. He has 29 years’ experience in accounting and auditing at PricewaterhouseCoopers.

Brown said his extensive experience in corporate affairs was expected to assist the board in achieving the turnaround strategy, “while also addressing the challenges of poor corporate governance at the airline”.

Tambi, who serves as a transport infrastructure expert at the New Partnership for Africa’s Development head office, is expected to assist the board to achieve the consolidation of the airline’s assets.

Brown has indicated a wish to consolidate SAA, Mango and SA Express under one company structure in a bid to save costs.

But key to the survival of the airline is a decision on the long-haul fleet – fuel makes up 35% of the airline’s current R34-billion annual operating costs – and the closure of unprofitable routes such as the Beijing flight, which loses some R300-million a year.

Those decisions are both politically fraught. Said Brown: “It is well known that SAA has been a loss-making airline for the past few years and my intervention is aimed [at stabilising the situation.”

Whether her decision to retain the air wing of the Jacob Zuma Foundation contributes to that aim remains to be seen.